Auditors commonly verify sales commission expense through a variety of methods, including but not limited to:
1. Review of Commission Contracts: Auditors review sales commission contracts to ensure that the terms and conditions of commission payments are correctly reflected in the financial statements.
2. Testing Controls: Auditors assess the effectiveness of internal controls related to commission expense to ensure that payments are authorized, calculated accurately, and properly recorded.
3. Sample Testing: Auditors select a sample of sales transactions to verify the accuracy of commission calculations and payments.
4. Analytical Procedures: Auditors may perform analytical procedures to compare historical commission expense trends, industry benchmarks, or other relevant data to identify any unusual fluctuations or anomalies.
5. Confirmation with Employees and Management: Auditors may confirm commission amounts and terms with sales personnel and management to verify the accuracy of recorded commission expenses.
6. Substantive Testing: Auditors perform substantive testing to ensure that commission expenses are accurately recorded, properly classified, and in compliance with applicable accounting standards.
It's important to note that these are general methods, and the specific procedures used by auditors may vary depending on the nature and complexity of the business, as well as any specific risks identified during the audit planning process.